EU, UK To Progress To Trade Talks

by Ulrika Lomas, Tax-News.com, Brussels

11 December 2017

The European Council will decide on December 15 whether talks on the UK's exit from the European Union can proceed to a second stage, to trade and tax issues.

The European Commission on December 8 recommended to the European Council to conclude that sufficient progress has been made in the first phase of the Article 50 negotiations with the United Kingdom, following an agreement recently reached on three priority areas: citizens' rights; the dialogue on Ireland and Northern Ireland and the border; and the financial settlement.

The Commission said EU citizens living in the United Kingdom will be protected under the deal, stating that the rights of EU citizens living in the United Kingdom and United Kingdom citizens in the EU27 will remain the same after the United Kingdom has left the EU. The Commission has also made sure that any administrative procedures will be cheap and simple for EU citizens in the United Kingdom, it said.

As regards the financial settlement, the United Kingdom has agreed that commitments taken by the EU28 will be honored by the EU28, including the United Kingdom.

According to the Commission, with regard to the border between Ireland and Northern Ireland, the United Kingdom acknowledges the unique situation on the island of Ireland and has made significant commitments to avoid a hard border.

Full details of the Commission's assessment are available in the Commission's Communication on the State of Progress of the Negotiations with the United Kingdom.

Jean-Claude Juncker, the President of the European Commission, said: "This is a difficult negotiation but we have now made a first breakthrough. I am satisfied with the fair deal we have reached with the United Kingdom. If the 27 Member States agree with our assessment, the European Commission and our Chief Negotiator Michel Barnier stand ready to begin work on the second phase of the negotiations immediately. I will continue to keep the European Parliament very closely involved throughout the process, as the European Parliament will have to ratify the final Withdrawal Agreement."

Michel Barnier, the European Commission's Chief Negotiator, said: "The Commission's assessment is based on the real, genuine progress made in each of our three priority areas. By agreeing on these issues, and settling the past, we can now move forward and discuss our future relationship on the basis of trust and confidence."

According to the findings of a survey released on December 11, the slow progress in Brexit talks is hitting business confidence, with activity and optimism in the services sector being particularly depressed.

Commenting on the findings, Peter Hemington, Partner, BDO LLP, said: "The unprecedented political and economic climate is stunting the growth of UK business. The continued absence of clarity about our potential Brexit trade deal leaves businesses lacking confidence to make important decisions regarding future investment and direction. The Government needs to be clear with all UK businesses about its Brexit plan and what the most likely outcome will be. Only then will UK businesses be able to make informed decisions and the necessary preparations to protect and encourage future growth."

The UK Government has briefly outlined what it intends its tax and customs regimes to look like after Brexit. On October 9, 2017, the UK Government released a number of white papers, setting out how it will manage its trade and customs policies, including its customs, value-added tax, and excise regimes, when the UK leaves the European Union. Its Customs Bill White Paper, which specifically looks at cross-border tax arrangements, says the UK's new legislation will, as far as possible, replicate the effect of existing EU customs laws.

The Customs Bill will give the UK the power to charge customs duty on goods; define how goods will be classified, set and vary the rates of customs duty and any quotas; amend the VAT and excise regimes so that they can function effectively post-exit; set out the rules governing how HMRC will collect and enforce the taxes and duties owed; and implement tax-related elements of the UK's future trade policy, the Government said.

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